Sustainability Reporting

CSRD: SECOND PHASE OF REPORTING COMMENCES

Sustainability reporting obligations under the CSRD as transposed into Irish law commence for entities within the second phase of reporting, for financial years commencing on or after 1 January 2025 (reporting year 2026):

large Irish-incorporated companies (which are not already in-scope under the first phase of reporting); and

• large issuers with securities listed on an EU regulated market (which are not already in-scope under the first phase of reporting).

Many issuers will be reporting as a group holding company and therefore including consolidated sustainability reporting in their group directors’ report. In-scope subsidiaries may be exempt from the obligation to report sustainability information where that company and its subsidiaries (if any) are included in the group directors’ report. However, any subsidiaries which are large public-interest entities with securities listed on an EU regulated market cannot avail of the subsidiary exemption and are required to report sustainability information in their directors’ report.

As previously flagged, some anomalies have been identified in relation to the legislative provisions implementing CSRD, including that certain companies, broadly all public limited companies, companies with securities listed on an EU regulated market and those authorised by the Central Bank of Ireland, are deemed to be "large" regardless of their size, meaning that they would come within scope of CSRD reporting for financial years commencing on or after 1 January 2025. We have made two detailed submissions to, and continue to liaise directly with, the Department of Enterprise, Trade and Employment to address this and other issues identified in relation to the transposition of the CSRD.

CSRD: TRANSITION PLAN IMPLEMENTATION GUIDANCE

In November 2024, EFRAG published draft Implementation Guidance on Transition Plan for Climate Change Mitigation, which provides non-authoritative support for companies reporting transition plans for climate change mitigation in accordance with the ESRS, including guidance on how to implement the requirements of ESRS E1. In addition to companies reporting under CSRD, EFRAG notes that the guidance may also be of relevance to entities that are in scope of other EU legislation that requires a transition plan, including the CS3D. The draft guidance also sets out FAQs in relation to transition plans. It is anticipated that the final form guidance will be published later in spring 2025.

CSRD: ESRS Q&A EXPLANATIONS

In December 2024, EFRAG released new technical Explanations, on its ESRS Q&A Platform, for five new environmental questions related to climate change mitigation and adaptation targets, biodiversity and ecosystems. The Explanations are provided as part of EFRAG’s role as a technical advisor to the European Commission, to support implementation of the ESRS.

CSRD: SME VOLUNTARY REPORTING STANDARD

EFRAG published a voluntary sustainability reporting standard for non-listed SMEs (VSME) that are not within scope of the CSRD. The VSME aims to provide a simple standardised reporting tool to assist non-listed SMEs in responding to requests for sustainability information from businesses for which they are suppliers (such as banks, investors or larger companies) efficiently and proportionately. The VSME, as a voluntary standard, is non-binding and the materiality analysis (applied under the ESRS) is replaced with an “if applicable” principle.

EU TAXONOMY REGULATION: FAQ

In November 2024, the European Commission has published final-form FAQ guidance on KPI Reporting under the Disclosures Delegated Act supplementing Article 8 of the EU Taxonomy Regulation.

In November 2024, the European Commission also published a set of draft FAQs providing technical explanations on various aspects of the EU taxonomy including the application of general requirements, technical screening criteria for specific activities outlined in the Climate and Environmental Delegated Acts, and the generic ‘do no significant harm’ (DNSH) criteria for climate change adaptation, pollution prevention and control and protection and restoration of biodiversity and ecosystems.

UK SRS: DEVELOPMENTS ANTICIPATED IN SPRING 2025

It is anticipated that the UK Government will approve UK-endorsed ISSB standards, to be known as UK Sustainability Reporting Standards (UK SRS) in Q1 2025. The FCA plans, following a consultation process, to replace its current climate-related disclosures for UK listed companies with the UK SRS for financial years commencing on or after 1 January 2026.

The FCA also plans to consult on transition plan disclosures with reference to the UK Transition Plan Taskforce Disclosure Framework.

TRANSITION PLANS: TNFD PUBLISHES DRAFT NATURE TRANSITION PLAN GUIDANCE

The Taskforce on Nature-related Financial Disclosures (TNFD) published a discussion paper on nature transition plans which includes draft guidance on nature transition planning for organisations developing and disclosing a transition plan in line with the TNFD Recommendations (which include a recommendation that organisations should disclose any transition plans in place). The draft guidance covers what a nature transition plan should include and how a plan should be presented and disclosed.

The TNFD has requested comments by 1 February 2025 and will publish its final guidance on nature transition planning in 2025.